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Professional Finance people no better than amateurs
Comments
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Returning to the original post, some observations and questions :-
Of course this is a valid topic for this forum, how can it not be ?
The IFAs are predictably trying to deflect the criticism as they always do when this sort of subject comes up.
IFAs are potentially beneficial when someone is confronted with a complex specialist topic where they are out of their depth. Sadly for many people this means anything financial.
If IFAs were good at picking winners, why are they not all making a good living out of doing that with their own money ?
Why do the vast majority of managed funds underperform the FTSE ?
Why do most IFAs insist on contunuing to push equities when the FTSE100 is still below its its 1999 peak ? (I think we know the answer to that one) ?
Why are the training and qualification requirements of IFAs so pathetically facile ?
How can one feel confident of obtaining unbiased advice when commission comes into it ?
I have never used an IFA, nor envisage doing so. But I recently had indirect experience of a mortgage advisor. Absolutely appalling.No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
You're ignoring persistency. There is an obvious selection bias when you're looking at actively managed funds which have been in existence for 10 years and haven't been closed.
You're also comparing FTSE100 trackers against the Allshare sector.
How many managed funds in the FTSEAllshare sector have closed in the past 10 years?
The evidence shows that the FTSE100 tracker has not been a good investment for the past 10 years. But I am happy to rest my case on the FTSE Allshare tracker data:
Best: Scot Widow at position 72/160
Worst: Axa at position 107/160
If you add 2% annual to the return (a figure that has been suggested to be a tracker advantage) the SW tracker would be at position 3/160. Now that really would be evidence for your case!!!0 -
If you could share the evidence I really would be grateful.
Try Smarter Investing by Tim Hale and read the studies referenced therein. Also try Bernstein.Not that many funds disappear and those that are dropped will tend to be merged with better ones which will keep the average up.
How will they keep the average up? There will always be funds that underperform over certain periods just as there will be some that outperform. If the former are merged with the latter, how do you think this earlier underperformance is reflected in the final figures?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
GeorgeHowell wrote: »Why do most IFAs insist on contunuing to push equities when the FTSE100 is still below its its 1999 peak ? (I think we know the answer to that one) ?
Because doing otherwise would be stupid and irresponsible.
1) Equities give the best long term performance.
2) You're looking at capital value and ignoring dividends.
3) Looking at peaks tells you little as sensible investors put money in either continuously or (for the brave and/or foolhardy) in the dips.
4) When are IFAs supposed to "push" equities? Only when the markets are at long-term peaks? Really?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
GeorgeHowell wrote: »......
Why do the vast majority of managed funds underperform the FTSE ?
Why do most IFAs insist on contunuing to push equities when the FTSE100 is still below its its 1999 peak ? (I think we know the answer to that one) ?
The vast majority of managed funds DONT underperform the FTSE.
On Trustnet there are 973 funds providing 10 year data. The best performing FTSE Allshare tracker is at position 578 - 3rd quartile.
The FTSE 100 is still below its 1999 peak - true, but then many (most???) investments in other sectors have performed better, and some extremely well, in that period. The FTSE represents less than 10% of the global market.0 -
On Trustnet there are 973 funds providing 10 year data. The best performing FTSE Allshare tracker is at position 578 - 3rd quartile.
All 973 in the UKX or ASX sectors?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Any evidence? The 10 year Trustnet data shows trackers roughly in the middle of the performance list - surely if they really had a 2.5% or even 1% performance advantage over other funds that would have become very obvious over 10 years.
For example: in the UK Allshare sector there are 160 funds which have 10 year data. The best tracker is the ScotWid Allshare at position 72. Most FTSE100 trackers are around the 120 position - 3rd quartile. The worst tracker is 4th quartile.
Doesnt seem to be much evidence of a long term advantage. Either trackers dont have a 1-2.5% annual advantage over other funds, or if these figures do include the advantage the underlying investment approach is rather unsuccessful.
From Trustnet: AXA Framlington UK Select Opportunities, AXA Framlington UK Growth, CF Lindsell Train UK Equity and Cazenove UK Opportunities are the only UK All Companies funds that have beaten their sector average in the each of the last five calendar years, according to the latest FE Trustnet study. The high level of volatility since 2007 has made it increasingly difficult for funds to consistently outperform; the four vehicles make up less than 2 per cent of the 256 UK All Companies with a long enough track record.
Link here:http://www.trustnet.com/News/Research.aspx?id=300732
My feeling is that it would have been pretty difficult to pick those 4 funds from the 256 possibilities in the sector five years ago.
Next question would be how a popular UT tracker would compare against the average of the UT fund sector over the period. Obviously, with hindsight the star performing AXA Framlington would have been a good choice, but choosing a fund going forwards over the next 5-10 years would be more difficult of course. The HSBC FTSE all share tracker, popular for obvious reasons, seems to do quite well, outperforming the UT fund sector average over the last 5 years. So unless it is possible to predict which of the UT funds will be the star performer over the next 5-10yrs, there would seem justification in simply going with the UT tracker rather than choosing a higher cost fund (but personally, I have no interest in this sector anyway).
In fairness though, should point our that 10 yr performance of the HSBC tracker relative to the UT sector average is not as good as it is over the last 5yrs. Not sure why, could be related to the lowering of the % ter on the HSBC tracker over the later time frame. Others may be able to explain reasons for this better than I can.
JamesU0 -
In fairness though, should point our that 10 yr performance of the HSBC tracker relative to the UT sector average is not as good as it is over the last 5yrs. Not sure why, could be related to the lowering of the % ter on the HSBC tracker over the later time frame. Others may be able to explain reasons for this better than I can.
Yup, TER dropped markedly when Vanguard came onto the market.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »All 973 in the UKX or ASX sectors?
973 OEICs/UTs in all IMA sectors. The poster to whom I was responding claimed that FTSE trackers outperformed "the vast majority of managed funds" and so presumably managed funds of any type should not form part of a sensible investment.0 -
973 OEICs/UTs in all IMA sectors. The poster to whom I was responding claimed that FTSE trackers outperformed "the vast majority of managed funds" and so presumably managed funds of any type should not form part of a sensible investment.
did i not say against the relevant tracker.
i think you're best suited to unit trusts if it makes you feel better.0
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